ANYTIMEkANYPLACEkANYWHERE - Heinz

4. RESTRUCTURING
CHARGES
Operation Excel
In Fiscal 1999, the company announced a transformative growth and restructuring initiative.
The initiative, named ‘‘Operation Excel,’’ is a multi-year, multi-faceted program creating
manufacturing centers of excellence, focusing the product portfolio, realigning the company’s
management teams and investing in growth initiatives.
Creating manufacturing centers of excellence is resulting in significant changes to the
company’s manufacturing footprint including the following initiatives: closing the Harlesden
factory in London, England and focusing the Kitt Green factory in Wigan, England on canned
beans, soups and pasta production and focusing the Elst factory in the Netherlands on
tomato ketchup and sauces; downsizing the Puerto Rico tuna processing facility and focusing
this facility on lower volume/higher margin products (completed in Fiscal 2000); focusing
the Pittsburgh, Pennsylvania factory on soup and baby food production and shifting other
production to existing facilities; consolidating manufacturing capacity in the Asia/Pacific
region; closing the Zabreh, Czech Republic factory and disposing of the Czech dairy business
and transferring the infant formula business to the Kendal, England factory (completed in
Fiscal 2000); downsizing the Pocatello, Idaho factory by shifting Bagel Bites production to the
Ft. Myers, Florida factory, and shifting certain Smart Ones entrée production to the Massillon,
Ohio factory (completed in Fiscal 2000); closing the Redditch, England factory and shifting
production to the Telford, England factory and the Turnhout factory in Belgium (completed
in Fiscal 2000); closing the El Paso, Texas pet treat facility and consolidating production
in the Topeka, Kansas factory; and disposing of the Bloomsburg, Pennsylvania frozen pasta
factory (completed in Fiscal 2000).
As part of Operation Excel, the company is focusing the portfolio of product lines on six
core food categories: ketchup, condiments and sauces; frozen foods; tuna; soup, beans and
pasta meals; infant foods; and pet products. A consequence of this focus on the core categories
was the sale of the Weight Watchers classroom business in Fiscal 2000.
Additionally, seven other smaller businesses, which have combined annual revenues of
approximately $80 million, are being disposed.
Realigning the company’s management teams will provide processing and product
expertise across the regions of North America, Europe and Asia/Pacific. Specifically, Operation
Excel includes creating a single U.S. frozen food headquarters, resulting in the closure of the
company’s Ore-Ida head office in Boise, Idaho (completed in Fiscal 2000); consolidating many
European administrative support functions; creating a single North American Grocery &
Foodservice headquarters in Pittsburgh, Pennsylvania, resulting in the relocation of the
company’s domestic seafood and pet food headquarters from Newport, Kentucky; and creating
two Asia/Pacific management teams with headquarters in Melbourne (for the Australian,
New Zealand and Japanese businesses) and Singapore (for all other Asian businesses).
The initiatives will result in the closure or exit of 21 factories or businesses. Management
estimates that these actions will impact approximately 6,000 employees with a net reduction
in the workforce of approximately 4,600, after expansion of certain facilities.
During Fiscal 2000, the company recognized net restructuring charges and implementation
costs totaling $392.7 million pretax ($0.74 per share). Pretax charges of $170.4 million were
classified as cost of products sold and $222.3 million as SG&A. During Fiscal 1999, the
company recognized restructuring charges and implementation costs totaling $552.8 million
pretax ($1.11 per share). Pretax charges of $396.4 million were classified as cost of products
sold and $156.4 million as SG&A.
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